Aave is looking to split up from Polygon while Lido has already done so.
A proposal circulated in the last four days that would have allowed Aave, Aave’s competitor for lending and the Polygon PoS to bridge $1.3billion worth of stablecoins idle on the Polygon PoS. Stablecoins will be transferred to protocols such as Sky, Angle or Robert Leshner’s Superstate.
You can also find out more about this by clicking here. “Blast-like” A strategy that unlocks an estimated 70 million dollars in annual returns for “ecosystem incentives” What Polygon has left on the street.
Blast-like I call it because, unlike Blast L2, Polygon’s users will have to rely on a bridge and they won’t get any yield rewards.
Marc Zeller, founder of Aave-chan Initiative, responded by publishing seven hours earlier a governance proposal that was quite aggressive, aiming to reduce the loan-to-value ratio (LTV), for all assets listed on Aave Polygon to zero.
What was the cause of separation? Zeller mentions the risk associated with “bridge vulnerabilities,” Invoking historical bridge hacks like Ronin, BNB Bridge, Wormhole, and others.
Zeller’s proposal also adjusts the reserve factor of all Aave assets at 85% in order to discourage deposits. It will cancel its Umbrella Safety Module deployment and migrate Aave’s governance v3 to another L2 network.
The proposal aims to co-incentivize other L2 chains to make it more attractive to Aave customers on Polygon, to move their liquidity to another chain (perhaps Avalanche C Chain?).
It is enough to say that this will kill Aave (currently the most popular protocol on sidechain by TVL, with $662 million in value) on Polygon.
Aave views Polygon revenues as a mere drop in the bucket. Aave has reported that Polygon revenues account for just 3.8% of total Aave revenues.
It’s the million-dollar problem: What would Aave do if Polygon chose to launch its bridged stablecoins on Aave to aUSDC?
“The Polygon community has only put forth a pre-PIP (preliminary proposal) at this stage, and the topic is still in the very early phases of discussion,” A spokesperson for Polygon told Blockworks. “Getting feedback from all stakeholders is essential, and we encourage continued conversation to ensure these proposals are fully discussed and evaluated.”
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